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VF Corp (VFC; Baa3 Neg/BBB- Neg) Steepening ahead of 1Q earnings

CONSUMER CYCLICALS
  • About 4bps of steepening in the curve today - unclear if it's nerves ahead of earnings but we reiterate caution for longs; we are heading in 20bps tighter vs. last earnings.
  • Only updates we have since the rough 4Q earnings and guidance is a seasoned industry operator as the new vans head (the whole mgmt is new so we don't see it as relevant) and Supreme sale for $1.5b - a positive but should have been expected given mgmt comments. Yes it will head to the BS pushing leverage down to mid 4x (net) but we will also loose $116m/yr of EBIT (sizeable given co's core brands are struggling to make money).
  • Lead indicators we track at including US card data and google search trends don't point to a recovery.
  • On RV: popular feedback after FY24 earnings was cheap on XCCY/vs. $ curve - we are trading in-line with them now. As we said investors don't need to give up carry in short-end to rotate into (in our eyes) lower risk co's; Coty (preferred) or Dufry. 29/32s continue to trade flat (spread and yield) - low cash px 32s may be driving that.

1Q25 (3m to June) results on Tuesday (6th) after the US close (call at 9:30pm London).
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